International Commercial Terms pptx

International Commercial Terms (INCOTERMS)
The INCOTERMS (International Commercial Terms) is a universally recognized set of
definitions of international trade terms, such as FOB, CFR and CIF, developed by the
International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract
responsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving tool.
The exporter and the importer need not undergo a lengthy negotiation about the conditions of
each transaction. Once they have agreed on a commercial term like FOB, they can sell and buy at
FOB without discussing who will be responsible for the freight, cargo insurance, and other costs
and risks.
The INCOTERMS was first published in 1936 INCOTERMS 1936 and it is revised
periodically to keep up with changes in the international trade needs. The complete definition of
each term is available from the current publication INCOTERMS 2000. The publication is
available at your local Chamber of Commerce affiliated with the International Chamber of
Commerce (ICC).
Many importers and exporters worldwide are accustomed to and may still use the INCOTERMS
1980, the predecessor of INCOTERMS 1990 and INCOTERMS 2000.
Under the INCOTERMS 2000, the international commercial terms are grouped into E, F, C and
D, designated by the first letter of the term (acronym), as follows:
International Commercial Terms
( INCOTERMS )
GROUP TERM Stands for
E EXW Ex Works
F FCA Free Carrier
FAS Free Alongside Ship
FOB Free On Board
C CFR Cost and Freight
CIF Cost, Insurance and Freight
CPT Carriage Paid To
CIP Carriage and Insurance Paid To
D DAF Delivered At Frontier
DES Delivered Ex Ship

DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid
DDP
Delivered Duty Paid
In practice, trade terms are written with either all upper case letters (e.g. FOB, CFR, CIF, and
FAS) or all lower case letters (e.g. fob, cfr, cif, and fas). They may be written with periods (e.g.
F.O.B. and c.i.f.).
In international trade, it would be best for exporters to refrain, wherever possible, from dealing in
trade terms that would hold the seller responsible for the import customs clearance and/or
payment of import customs duties and taxes and/or other costs and risks at the buyer's end, for
example the trade terms DEQ (Delivered Ex Quay) and DDP (Delivered Duty Paid) . Quite
often, the charges and expenses at the buyer's end may cost more to the seller than anticipated.
To overcome losses, hire a reliable customs broker or freight forwarder in the importing country
to handle the import routines.
Similarly, it would be best for importers not to deal in EXW (Ex Works) , which would hold the
buyer responsible for the export customs clearance, payment of export customs charges and
taxes, and other costs and risks at the seller's end.
EXW {+ the named place}
Ex Works
Ex means from. Works means factory, mill or warehouse, which is the seller's premises.
EXW applies to goods available only at the seller's premises. Buyer is responsible for
loading the goods on truck or container at the seller's premises, and for the subsequent
costs and risks.
In practice, it is not uncommon that the seller loads the goods on truck or container at the
seller's premises without charging loading fee.
In the quotation, indicate the named place (seller's premises) after the acronym EXW, for
example EXW Kobe and EXW San Antonio.
The term EXW is commonly used between the manufacturer (seller) and export-trader
(buyer), and the export-trader resells on other trade terms to the foreign buyers. Some
manufacturers may use the term Ex Factory, which means the same as Ex Works.

FCA {+ the named point of departure}
Free Carrier
The delivery of goods on truck, rail car or container at the specified point (depot) of
departure, which is usually the seller's premises, or a named railroad station or a named
cargo terminal or into the custody of the carrier, at seller's expense. The point (depot) at
origin may or may not be a customs clearance center. Buyer is responsible for the main
carriage/freight, cargo insurance and other costs and risks.
In the air shipment, technically speaking, goods placed in the custody of an air carrier is
considered as delivery on board the plane. In practice, many importers and exporters still
use the term FOB in the air shipment.
The term FCA is also used in the RO/RO (roll on/roll off) services.
In the export quotation, indicate the point of departure (loading) after the acronym FCA,
for example FCA Hong Kong and FCA Seattle.
Some manufacturers may use the former terms FOT (Free On Truck) and FOR (Free On
Rail) in selling to export-traders.
FAS {+ the named port of origin}
Free Alongside Ship
Goods are placed in the dock shed or at the side of the ship, on the dock or lighter, within
reach of its loading equipment so that they can be loaded aboard the ship, at seller's
expense. Buyer is responsible for the loading fee, main carriage/freight, cargo insurance,
and other costs and risks.
In the export quotation, indicate the port of origin (loading) after the acronym FAS, for
example FAS New York and FAS Bremen.
The FAS term is popular in the break-bulk shipments and with the importing countries
using their own vessels.
FOB {+ the named port of origin}
Free On Board
The delivery of goods on board the vessel at the named port of origin (loading), at seller's
expense. Buyer is responsible for the main carriage/freight, cargo insurance and other
costs and risks.

In the export quotation, indicate the port of origin (loading) after the acronym FOB, for
example FOB Vancouver and FOB Shanghai.
Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only.
However, in practice, many importers and exporters still use the term FOB in the air
freight.
In North America, the term FOB has other applications. Many buyers and sellers in
Canada and the U.S.A. dealing on the open account and consignment basis are
accustomed to using the shipping terms FOB Origin and FOB Destination.
FOB Origin means the buyer is responsible for the freight and other costs and risks.
FOB Destination means the seller is responsible for the freight and other costs and risks
until the goods are delivered to the buyer's premises, which may include the import
customs clearance and payment of import customs duties and taxes at the buyer's country,
depending on the agreement between the buyer and seller.
In international trade, avoid using the shipping terms FOB Origin and FOB Destination,
which are not part of the INCOTERMS (International Commercial Terms).
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CFR {+ the named port of destination}
Cost and Freight
The delivery of goods to the named port of destination (discharge) at the seller's expense.
Buyer is responsible for the cargo insurance and other costs and risks. The term CFR was
formerly written as C&F. Many importers and exporters worldwide still use the term
C&F.
In the export quotation, indicate the port of destination (discharge) after the acronym
CFR, for example CFR Karachi and CFR Alexandria.
Under the rules of the INCOTERMS 1990, the term Cost and Freight is used for ocean
freight only. However, in practice, the term Cost and Freight (C&F) is still commonly
used in the air freight.
CIF {+ the named port of destination}
Cost, Insurance and Freight
The cargo insurance and delivery of goods to the named port of destination (discharge) at

the seller's expense. Buyer is responsible for the import customs clearance and other costs
and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym
CIF, for example CIF Pusan and CIF Singapore.
Under the rules of the INCOTERMS 1990, the term CIF is used for ocean freight only.
However, in practice, many importers and exporters still use the term CIF in the air
freight.
CPT {+ the named place of destination}
Carriage Paid To
The delivery of goods to the named place of destination (discharge) at seller's expense.
Buyer assumes the cargo insurance, import customs clearance, payment of customs duties
and taxes, and other costs and risks.
In the export quotation, indicate the place of destination (discharge) after the acronym
CPT, for example CPT Los Angeles and CPT Osaka.
CIP {+ the named place of destination}
Carriage and Insurance Paid To
The delivery of goods and the cargo insurance to the named place of destination
(discharge) at seller's expense. Buyer assumes the import customs clearance, payment of
customs duties and taxes, and other costs and risks.
In the export quotation, indicate the place of destination (discharge) after the acronym
CIP, for example CIP Paris and CIP Athens.
DAF {+ the named point at frontier}
Delivered At Frontier
The delivery of goods to the specified point at the frontier at seller's expense. Buyer is
responsible for the import customs clearance, payment of customs duties and taxes, and
other costs and risks.
In the export quotation, indicate the point at frontier (discharge) after the acronym DAF,
for example DAF Buffalo and DAF Welland.
DES {+ the named port of destination}
Delivered Ex Ship

The delivery of goods on board the vessel at the named port of destination (discharge), at
seller's expense. Buyer assumes the unloading fee, import customs clearance, payment of
customs duties and taxes, cargo insurance, and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym
DES, for example DES Helsinki and DES Stockholm.
DEQ {+ the named port of destination}
Delivered Ex Quay
The delivery of goods to the quay (the port) at destination at seller's expense. Seller is
responsible for the import customs clearance and payment of customs duties and taxes at
the buyer's end. Buyer assumes the cargo insurance and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym
DEQ, for example DEQ Libreville and DEQ Maputo.
DDU {+ the named point of destination}
Delivered Duty Unpaid
The delivery of goods and the cargo insurance to the final point at destination, which is
often the project site or buyer's premises, at seller's expense. Buyer assumes the import
customs clearance and payment of customs duties and taxes. The seller may opt not to
insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge) after the acronym
DDU, for example DDU La Paz and DDU Ndjamena.
DDP {+ the named point of destination}
Delivered Duty Paid
The seller is responsible for most of the expenses, which include the cargo insurance,
import customs clearance, and payment of customs duties and taxes at the buyer's end,
and the delivery of goods to the final point at destination, which is often the project site
or buyer's premises. The seller may opt not to insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge) after the acronym
DDP, for example DDP Bujumbura and DDP Mbabane.
EXPORT DEPARTMENT
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Diagram: International Commercial Terms




INTERNATIONAL COMMERCIAL TERMS
EXW

Ex Works
FAS Free Alongside Ship
FCA Free Carrier
FOB Free On Board
CFR Cost and Freight

(The former acronym of Cost and Freight was C&F)
CIF Cost, Insurance and Freight
CIP Carriage and Insurance Paid To
CPT Carriage Paid To
DAF Delivered At Frontier
DDP Delivered Duty Paid
DDU Delivered Duty Unpaid
DEQ Delivered Ex Quay
DES Delivered Ex Ship